Loyalty programs fail to engage

Loyalty programs have not evolved with the digital age and are failing to engage consumers, according to a new report, “Fixing the Cracks: Reinventing Loyalty Programs for the Digital Age’ by Capgemini Consulting.

The research shows that most loyalty programs follow a basic transactional philosophy where rewards are based on purchase. Only a small minority of programs recognise and reward consumers for engaging and interacting with the brand in other meaningful ways.

Seventy nine per cent of loyalty programs use the mobile channel, and yet only 24 per cent allow redemption through it, while 97 per cent of loyalty programs are based primarily on purchases made by consumers.

Only 16 per cent of loyalty programs reward customers for activities, such as taking online surveys, rating and reviewing establishments or referring friends to the program, and 14 per cent employ gamification mechanisms to reward customers.

The report recommends that loyalty programs be seen within the larger context of a marketing strategy that is focused on driving customer engagement. Organisations need to look at each step of the loyalty program, from design to evolution, through the prism of engagement.

Mark Taylor, global lead for customer experience transformation at Capgemini, said brands need to revisit their approach to loyalty.

“The key is to integrate the loyalty program into the overarching customer experience and to reward engagement as well as the simple transaction. Additionally, since relevance is the highest form of customer intimacy, offering advanced levels of customisation and tailored experiences will enrich loyalty programs and further encourage customer engagement,” Taylor said.

According to the research, fewer than one in 10 loyalty programs offer point redemption across all channels. To be commercially successful, programs must engage customers across every customer touch point.